Sharp Devaluation of Argentine Peso

Argentina scrapped most of its currency controls and will allow the peso to start trading freely Thursday.

Finance Minister Alfonso Prat-Gay indicated he anticipates the peso could plunge by about 30 percent –which is the gap between the official exchange rate and a parallel rate known as the blue-chip swap– when markets open on Thursday in Buenos Aires.

The move follows promises by President Mauricio Macri to implement reforms in order to increase exports and spur economic growth.

By lifting controls, Macri also hopes to spark a wave of investment in an economy that is battling low foreign reserves and double-digit inflation.

Farmers in Argentina, a grains-exporting powerhouse, have been waiting for the peso to weaken before selling stockpiles of soybeans. Manufacturers have argued for controls to be lifted so they can import crucial parts for production.

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